Accounting Exam #2 multiple choice

John applies overhead based on direct labor hours. At the beginning of the year, total overhead cost was estimated to be $1,120,000. For the month of November, John applied overhead of $80,000, which was based on 10,000 actual direct labor hours. How many direct labor hours were estimated at the beginning of the year? 140,000 hours 500,000 hours 150,000 hours None of these are correct

140,000 hours

Materials in the raw materials account do not become direct materials A. Until they are withdrawn from inventory for use in production. B. Until the finished product is sold. C. Until they are purchased from a vendor. D. None of these.

A. Until they are withdrawn from inventory for use in production

If a company uses normal costing, which costs would be added to work in process inventory? Actual costs for direct materials; estimated costs for direct labor and overhead. Actual costs for direct materials and direct labor; estimated costs for overhead. Actual costs for direct materials and overhead; estimated costs for direct labor. Estimated costs for direct materials, direct labor, and overhead. None of these are correct.

Actual costs for direct materials and direct labor; estimated costs for overhead.

Period costs are: Prime costs, direct labor, and selling costs All costs that aren't product costs Conversion costs Direct materials, direct labor, and overhead

All costs that aren't product costs

CVP analysis can be used to study the effect of: changes in the selling price on a company's profitability changes in the variable cost on a company's profitability changes in the fixed cost on a company's profitability All of the above are correct.

All of the above are correct.

Which of the following would be considered a direct material? A memory chip included in a computer built by Dell An air conditioner installed in a new home built by a developer Pepperoni included on a Domino's pizza (measured by weight) All of the above would be considered a direct material.

All of the above would be considered a direct material.

Which of the following is a correct statement about retained earnings? Tracks the company's cumulative net income and losses, and dividends paid or declared. Is decreased by dividends to shareholders. Is increased by the company's net income. Is decreased by the company's losses All of these are correct. None of these are correct.

All of these are correct.

Which of the following businesses would most likely use a process costing system? A printing business A dental clinic An automobile service center An oil refinery A tailor shop

An oil refinery

Which of the following equations is true? Contribution margin = Sales revenue x Variable cost ratio Contribution margin = Contribution margin ¸ Variable costs Contribution margin = Sales revenue - Variable costs Contribution margin = Fixed costs

Contribution margin = Sales revenue - Variable costs

Job-costing may only be used by: A. Service companies. B. Merchandising companies. C. Manufacturing companies. D. All of these may use job-costing.

D. All of these may use job-costing.

Which of the following is not a current liability? A. Accounts payable. B. Unearned revenue. C. Sales tax payable. D. Bonds payable in 5 years.

D. Bonds payable in 5 years.

When a company declares a cash dividend, which of the following are true? A. Assets are decreased. B. Assets are increased. C. Stockholders' equity is increased. D. Liabiliites are increased.

D. Liabiliites are increased.

Direct costs A. are incurred for the benefit if the business as a whole. B. would continue even if a particular product were discontinued. C. can be assigned to products only by a process of allocation. D. are those costs that can be easily and accurately traced to a cost object.

D. are those costs that can be easily and accurately traced to a cost object.

When the board of directors approves a dividend be paid to its shareholders in 30 days, the company should: Decrease net income by recording dividend expense and decrease cash. Decrease net income by recording dividend expense and increase dividends payable. Decrease retained earnings and decrease cash Decrease retained earnings and increase dividends payable.

Decrease retained earnings and increase dividends payable.

Conversion cost is the sum of Direct labor cost and overhead cost Product costs and period costs Selling cost and administrative cost Direct labor cost and direct material cost

Direct labor cost and overhead cost

What is the typical cost system used by companies that make unique or special-order products, such as customized publications, built-in cabinets, or made-to-order jewelry? Job order costing Adjusted basis costing Process costing All of the above

Job order costing

The provision of accounting information for internal users is known as: Accounting for planning and control. Information provision Managerial accounting. Financial accounting.

Managerial accounting.

Dougherty Company employs 20 individuals. Eight employees are paid $12 per hour and the rest are salaried employees paid $3,000 a month. How would total costs of personnel be classified? Variable cost. Fixed cost. Mixed cost. Indirect cost.

Mixed cost.

Outstanding stock represents the: Number of shares that are currently held by stockholders. Number of shares that have been sold. Number of shares that have been repurchased by the corporation Maximum number of shares that can be issued.

Number of shares that are currently held by stockholders.

Which of the following formulas is used to calculate a predetermined overhead rate? Predetermined Overhead Rate = Estimated Annual Manufacturing Cost / Estimated Quarterly Activity Level Predetermined Overhead Rate = Actual Annual Cost of Goods Sold / Estimated Semi-annual Labor Hours Predetermined Overhead Rate = Estimated Annual Overhead / Actual Annual Activity Level Predetermined Overhead Rate = Actual Annual Overhead / Actual Annual Activity Level Predetermined Overhead Rate = Estimated Annual Overhead / Estimated Annual Activity Level

Predetermined Overhead Rate = Estimated Annual Overhead / Estimated Annual Activity Level

A company that desires to lower its break-even point should strive to: Decrease selling price per unit Reduce variable cost per unit Increase total fixed costs Sell more units

Reduce variable cost per unit

What is the range of activity, defined by a company's normal operating volume, that limits the validity of using a linear equation to estimate costs? Normal range. Relevant range. Activity range. Validity range.

Relevant range.

As the volume of activity increases within a company's normal range of operating, the variable cost per unit: Remains constant. Increases. Decreases. Can be misleading and lead to poor decisions.

Remains constant.

Which of the following would not be considered a product cost? The cost of electricity in the manufacturing plant. Fabric used to manufacture t-shirts. The company's CEO salary. Depreciation on a delivery truck.

The company's CEO salary

The comprehensive set of budgets that serves as a company's overall financial plan is commonly known as: A. an integrated budget. B. a pro-forma budget. C. a master budget. D. a financial budget. E. a rolling budget.

a master budget.

The property tax paid on the factory is a direct cost if the cost object is the factory is an indirect cost if the cost object is the product produced could be either a direct cost or an indirect cost, depending on the cost object all of these

all of these

If a company decreases the number of units it produces, within their normal range of operating total variable costs will increase. total fixed costs will decrease. fixed costs per unit will increase. All of these are correct

fixed costs per unit will increase.

Manufacturing overhead: includes direct materials, indirect materials, indirect labor, and factory depreciation. is easily traced to jobs. is a pool of indirect production costs that must somehow be attached to each unit manufactured. includes all selling costs. should not be assigned to individual jobs because it bears no obvious relationsip to them.

is a pool of indirect production costs that must somehow be attached to each unit manufactured.

A landlord records the collection of a tenant's security deposit as a(n): prepaid expense. liability. contingent liability. contra liability.

liability.

Long-term debt generally includes obligations that will be satisfied within one year. accounts payable, because they are interest-bearing. obligations that extend beyond one year. accrued expenses.

obligations that extend beyond one year.

The breakeven point is when the company is operating at a loss. the company is earning a small profit total sales equals total variable costs. total revenue equals total cost. total sales equals operating income.

total revenue equals total cost.